By Christine Duhaime, BA, JD, Certified Financial Crime & Anti-Money Laundering Compliance Specialist
Canadian Company Executives Pleads Guilty to Renewable Energy Money Laundering Conspiracy & Fraud
Nathan Stoliar, a prominent Australian executive, has pleaded guilty in the US to several criminal charges including money laundering conspiracy, for selling fraudulent renewable energy credits, similar in some ways to carbon credits, from Canada to American companies.
Although the case was not prosecuted in Canada, it is the first Canadian instance of renewable energy fraud and money laundering that has been prosecuted.
According to American law enforcement, a Vancouver company controlled and operated by Stoliar, City Farm Biofuel, claimed to produce biofuel which was sold to a US company that was part of the scheme, Global E Marketing. It used the imports of non-existant biofuel products to generate and sell renewable identification numbers (RINs) to third parties so that the latter could comply with EPA renewable energy requirements. Stoliar’s Vancouver company allegedly made US$37 million from the environmental crime scheme. Stoliar is alleged to have created false records to conceal the production, importation, sale and fraudulent RIN generation and used Canadian bank accounts in Vancouver to launder the proceeds of crime.
A Politically Exposed Person in the US and Canada
Stoliar was a foreign politically exposed person in the US and in Canada when he set up bank accounts in Vancouver and Nevada for, inter alia, City Farm Biofuel. According to the Australian media, he was a very close associate of Eddie Obeid, a prominent Australian politician who was Minister of Mineral Resources and Minister of Fisheries in Australia. Their close association is substantially detailed in the international media. According to Australian media, Obeid was recently found by an Australian corruption commission to have acted corruptly in relation to his position while a member of Parliament. Stoliar had other close associations and business associations that likewise made him politically exposed in respect of his dealings in Canada and the US.
According to the OECD and FATF, politically exposed persons are higher risk for money laundering and other financial crimes, particularly accepting and paying bribes because they can use their positions of power to influence economic decisions to their benefit, or to the benefit of close associates, and because they have access to facilitate the removal of state assets from states through gatekeepers or other facilitators.
Under anti-money laundering law, banks in Canada and the US are required to exercise enhanced due diligence in respect of politically exposed persons and to obtain senior management approval to open and maintain bank accounts of politically exposed persons for three purposes: (a) to protect the bank; (b) to preserve the integrity of the financial system; and (c) to protect the country’s reputation as a jurisdiction that does not act as a money laundering haven.
Politically exposed persons include high-ranking politicians, members of the judiciary, heads of NGOs and other organizations and people with whom they are closely associated personally or in business such as advisors, joint venturers and people with whom they have an intimate relationship.
Stoliar does not appear to have been charged in Canada for money laundering in connection with the renewable energy fraud scheme in respect of the use of the Canadian bank accounts in Vancouver.
In the US, Stoliar was indicted on January 15, 2014 on several charges including conspiracy, wire fraud, making a false statement and obstruction of justice and faces a term of incarceration of up to 20 years.
Growing Financial Crime Concern with Renewable Energy
Financial crime in renewable energy is a growing concern for law enforcement and is expected to explode as more businesses enter the lucrative renewable energy field. Over €15 billion was lost in the EU from financial crimes associated with carbon emissions trades including VAT fraud, money laundering and theft.
Our summary of an Interpol report on financial crime and renewable energy is here. Interpol noted that the lack of regulation and the legal complexity of renewable energy credits are contributors to the increase in financial crimes, particularly in respect of fake carbon and other renewable energy credits.
It is the fifth major biofuel criminal case in the US involving renewable energy. In December 2013, the US Department of Justice disallowed $33 million in renewable fuel credits sold by an Indiana company for biofuel it did not manufacture. Earlier in the year, federal prosecutors in the US charged two other US companies of selling millions of fraudulent renewable certificates.